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Leggett & Platt - Growth & Income

Leggett & Platt Inc.
(
LEG
) recently raised its quarterly dividend by a penny or 3.6% to 29
cents per share, marking the 41st consecutive annual dividend
increase and reflecting a 13% compound annual growth rate. This
diversified engineered products and components manufacturer also
announced a positive earnings surprise of nearly 18.4% for the
third quarter of 2012.

A solid dividend yield of 4.3%, robust top and bottom line
projections, rising earnings momentum over the past week and an
expected long-term earnings per share growth rate of 15.0% make
this Zacks #2 Rank (Buy) an attractive pick for investors seeking
both growth and income.

Stellar Third Quarter

On October 29, Leggett & Platt reported record third quarter
earnings per share of 45 cents, rising sharply by 45% year over
year and beating the Zacks Consensus Estimate of 38 cents. The
better-than-expected results were mainly driven by a sturdy
operational performance that comprised superior volume and margin
growth.

Total sales climbed 4% to $982.2 million compared with $940.9
million in the year-ago period, while it marginally exceeded the
Zacks Consensus Estimate of $981 million. The robust sales
performance came from a 7% rise in same location sales volumes.
However, this increase was slightly impacted by a 4% decline in
revenue, which resulted from a slip in rod mill trade sales and
fluctuations in currency rates.

Leggett & Platt forecasted full-year 2012 earnings per share
between $1.45 and $1.52, representing a significant rise from
earnings per share in the trailing four years of 62 cents, 70
cents, $1.15 and $1.04. Net sales are anticipated at $3.70 billion
to $3.75 billion.

The company guided fourth quarter earnings per share of 25 cents to
32 cents, with sales coming in the $830 million - $880 million
range.

Earnings Momentum on the Rise

All 5 estimates for 2012 have been revised upward over the past 7
days, sending the Zacks Consensus Estimate higher by 6.4% to $1.49.
Similarly, the Zacks Consensus Estimate for 2013 is up 3.7% to
$1.68 as 5 of 6 estimates moved higher. These estimates represent
year-over-year growth of 33% for 2012 and 13% for 2013.

Eye-Catching Dividend

Leggett & Platt has been consistently raising its dividend
since the initiation of the payment in 1987. In August, the company
announced its 41st annual dividend increase, bringing its
annualized dividend to $1.16 per share, up 3.6% from the previous
level.

The company's current dividend yields about 4.3%, the highest among
the S&P 500 Dividend Aristocrats with more than 30 consecutive
annual dividend increases. Furthermore, only 11 members of the
S&P 500 possess a history of higher consecutive annual dividend
increases than Leggett & Platt.

Reasonable Valuation

Valuation looks reasonable for Leggett & Platt, with shares
trading at 18.6x 12-month forward P/E, on par with its peer group
average. However, on a price-to-book basis, shares are currently
trading at 2.8x, a 75% premium to the peer group average of 1.6x.

Nevertheless, the stock looks attractive given a trailing 12-month
ROE of 13.3%, which is higher than the peer group average of 11.9%.
The company's long-term estimated earnings per share growth rate
also remains strong at 15.0%.

Chart

The chart below indicates steady growth in the company's share
price since June 25, 2012, reflecting an upside of about 39.5%.
Shares of Leggett & Platt have continually outperformed its 50
and 200-day moving averages since June and July, respectively.
Average volume also remains fairly strong at roughly 1,470K daily.

Founded in 1883 and headquartered in Carthage, Missouri, Leggett
& Platt is a global manufacturer that conceives, designs and
produces a broad variety of engineered components and products
found in homes, offices, retail stores and automobiles. The
company's most important product line includes components for
residential furniture and bedding, retail store fixtures and point
of purchase displays, and components for office furniture. It has a
market cap of $3.26 billion.

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